Naked Put

DEFINITION of 'Naked Put'

A put option whose writer does not have a short position in the stock on which he or she has written the put. Sometimes referred to as an "uncovered put."

BREAKING DOWN 'Naked Put'

Naked puts are very risky since the writer can lose big if the underlying asset moves opposite to the desired direction. But, profits are huge if the underlying asset moves in the right direction.

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RELATED FAQS
  1. Can I have a short put position in my IRA?

    A trader may place naked short put positions in an IRA. This naked option position must be cash-secured, meaning that the ... Read Full Answer >>
  2. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  3. What is after-hours trading? Am I able to trade at this time?

    After-hours trading (AHT) refers to the buying and selling of securities on major exchanges outside of specified regular ... Read Full Answer >>
  4. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
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    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
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